British Chancellor of the Exchequer Jeremy Hunt yesterday ripped up what was left of British Prime Minister Liz Truss’ controversial economic program, scrapping tax cuts and removing support for household energy bills in an effort to restore order to UK public finances.
After the backlash against Truss’ plan pushed up borrowing costs for the UK government, the package of ￡32 billion (US$36.2 billion) is less than half of what economists say the government might need to put government debt on a stable trajectory after soaring inflation and sputtering growth gutted tax revenue.
Together with earlier U-turns, the decisions reverse almost all of the ￡45 billion in tax cuts and giveaways Truss announced last month, raising questions about whether she can survive in office.
Photo: Reuters
The only major changes left from that announcement are those that are already part way through legislation, on national insurance contributions and stamp duty. Hunt signaled he was likely to make more severe spending cuts in the weeks ahead.
“There will be more difficult decisions, I’m afraid, on both tax and spending as we deliver our commitment to get debt falling as a share of the economy over the medium term,” Hunt said, adding that the priority would be on protecting “the most vulnerable.”
UK government bonds and the pound surged, with the yield on 30-year gilts falling as much as 44 basis points at one point.
That would be second-biggest daily drop on record if the debt were to close at that level.
Truss’ energy support scheme has also been curtailed. The current price freeze, capping the average bill at ￡2,500 a year for two years, would be reviewed in April, when it would be redesigned so that it is more targeted at vulnerable households and would “better incentivize energy efficiency.”
Hunt was to give further details to the British House of Commons at 3:30pm yesterday. He also intends to deliver a full fiscal plan on Oct. 31.
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